Asian shares up on China relief, Ukraine strains remain

A man (L) looks at a stock quotation board outside a brokerage in Tokyo April 14, 2014. REUTERS/Issei Kato

By Marc Jones

LONDON (Reuters) - Share markets made broad gains on Wednesday after China reported economic growth a touch above forecasts, a relief for investors who had feared a much weaker outcome.

China's economy grew 7.4 percent in the first quarter, from a year earlier, pipping forecasts of 7.3 percent. That was welcome news to many given whisper numbers nearer 7 percent, following a string of soft numbers recently.

Other Chinese data for March was mixed, with industrial output a shade under estimates but retail sales picking up.

The relief rippled through Asian markets, with Japan's Nikkei ending up 3 percent - its biggest gain since February. Hopes of more Bank of Japan stimulus also helped.

European focus was quickly switching to the day's slate of data releases. UK employment and earnings numbers and updated March inflation figures for the euro zone are all likely to feed the debate on how much ECB and Bank of England policies could potentially diverge this year.

YELLEN AHEAD

Markets face another test later when Federal Reserve Chair Janet Yellen speaks on monetary policy and the economic recovery before the Economic Club of New York at 1625 GMT.

Sentiment may get a lift if she offers reassurance that any rise in interest rates will come well after the Fed finishes its asset-buying programme.

Capping the mood was caution over the situation in Ukraine after Russia declared the country to be on the brink of civil war and Kiev said an "anti-terrorist operation" against pro-Moscow separatists was under way.

In currency markets, the majors were confined to tight orbits with the euro a fraction higher at $1.3823 while the dollar edged up to 102.20 yen.

The main mover was the New Zealand dollar which took a spill after the country reported inflation at a surprisingly low 1.5 percent in the first quarter. That prompted markets to pare back expectations on how far and fast interest rates might rise there.

The kiwi fell to its lowest in more than a week at $0.8587, and dragged down its Australian counterpart to $0.9359.

In commodities, gold was pinned at $1,301.60 an ounce, well off Monday's peak at $1,330.90. It had tumbled about 2 percent on Tuesday on heavy stop-loss orders placed by momentum traders as prices broke below the key 200-day moving average.

Benchmark Brent oil dipped 9 cents to $109.27 on developments in Ukraine and the China data, while U.S. crude futures were up 19 cents at $103.94.

"A lot of China watchers have been focused on the idea that the February (industrial production) number was distorted by the (Chinese New Year) holidays and were looking for the March data to confirm that was the case. But that hasn't come through," said Michael McCarthy, CMC Markets chief strategist in Sydney.